Chapter 7:

Positioning Services in Competitive Markets

Basic Focus Strategies for Services

(Fig 7.1)
BREADTH OF SERVICE OFFERINGS

Narrow
Service Focused

Wide
Unfocused (Everything for everyone)

Many
NUMBER OF MARKETS SERVED

Few

Fully Focused (Service and market focused)

Market Focused

Source: Robert Johnston Achieving Focus in Service Organizations, The Service Industries Journal, Vol. 16, January 1996, pp. 1020 Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 5

Market Segmentation Forms the Basis for Focused Strategies

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 7

Market Segmentation
Firms vary widely in ability to serve different types of customers
Micro Segmentation
Micro segmentation strategies target small groups of customers sharing certain relevant characteristics at a specific point in time e.g., Royal Bank of Canada 10 million customers Segmented monthly basis using data modeling algorithms on basis of Risk profile Current and projected profitability Life stage Likelihood of leaving the bank Preferred channel Products held Response to promotions

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 8

Identifying and Selecting Target Segments

Target segments should be selected with reference to
Firms ability to match or exceed competing offerings directed at the same segment o Not just profit potential
o

Some underserved segments can be huge, especially poor consumers in emerging economies
o

For example: rural consumers Financial Services focusing on this market

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 9

Service Attributes and Levels

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 10

Developing Right Service Concept for a Specific Segment

Use research to identify and prioritize which attributes of a given service are important to specific market segments Individuals may set different priorities according to:
o o o o o

Purpose of using the service Ex Selection of Restaurant Who makes decision Timing of use Whether service is used alone or with a group Composition of that group

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 11

Important versus Determinant Attributes

Consumers usually choose between alternative service offerings based on perceived differences between them

Important Attribute : Prime attribute for selection of a service. Ex On time departure

Determinant attributes determine buyers choices between competing alternatives : Collection of Specific Attributes Ex availability of frequent flyer programs, ease of making reservations, quality of food and in-flight service for business class

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 12

Establishing Service Levels and Tiers

Need to make decisions on service levelslevel of performance firm plans to offer on each attribute
o

Easily quantified attributes are easier to understand and generalizable

Service tiering: Positioning strategy based on offering several price-based classes of service concept
Industry Hotel Airline Tiers Based on Star Ratings Key Service Attributes and Physical Elements used in Tiering Landscaping, Architecture, room size, amenities etc

Classes : Economy, Reservation flexibility, Check in services, Seat Business, Premium width, meal and beverage service, lounges at airports etc

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 13

Positioning Distinguishes a Brand from Its Competitors

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 15

Four Principles of Positioning Strategy

Must establish position for firm or product in minds of customers Position should be distinctive, providing one simple, consistent message Position must set firm/product apart from competitors A company cannot be all things to all peoplemust focus its efforts

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 16

Principles of Positioning
The service managers needs to answer these questions before planning positioning strategy What does our firm currently stand for in the minds of current and prospective customers? What customers do we serve now, and which ones would we like to target in the future? What is value proposition and target segment for each of our current service offerings? How do our service offerings differ from competitors? What changes must we make to our offerings to strengthen our competitive position? Avoid trap of investing too heavily in points of differences that are easily copied

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 17

Role of Positioning in Marketing Strategy

Positioning links market analysis and competitive analysis to internal corporate analysis From the above 3 a positioning statement is developed
Positioning strategy can take place at different levels
Multi-site, multi-product business: Position may be established for entire organization, given service outlet or specific service outlet o Consistency among services offered at same location because the image of one may spill over to others o Ex. Hospital is specialized in cardiac care. It should position- Heart Care Hospital
o

Help prospective customers get mental fix on what to expect Failure to select desired position in marketplace and develop a marketing action plan to hold this position may result in:
o o

Head-on competition from a stronger competitor Organizations position being so blurred that nobody knows what its distinctive competence really is
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 23

Market, Internal, and Competitor Analysis

(Fig 7.3)

MARKET ANALYSIS

Size Composition Location Trends

Define, Analyze Market Segments

Select Target Segments To Serve

INTERNAL ANALYSIS

Resources Reputation Constraints Values

Articulate Desired Position in Market Select Benefits to Emphasize to Customers

Marketing Action Plan

COMPETITOR ANALYSIS

- Strengths

Weaknesses Current Positioning

Analyze Possibilities for Differentiation

Source: Developed from an earlier schematic by Michael R. Pearce

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 24

Anticipating Competitive Response

Competitors might pursue same market position
Independently do same positioning analysis and arrive at similar conclusions o Competitors may take steps to reposition own service
o

Get inside competitors headsconduct internal corporate analysis for all current/potential challengers to get sense of how they might act Couple these insights with market data Analyze possible effects of alternative competitive moves
o o

Impact of price cut on demand, market share, and profits Responses of different segments to changes in service attributes

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 25

Positioning Maps

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 26

Using Positioning Maps to Plot Competitive Strategy

Useful way to represent consumer perceptions of alternative products in visual format Information about a product can be obtained from market data, derived from ratings by representative consumers, or both. If consumer perceptions of service characteristics differ sharply from "reality" as defined by management, then marketing efforts may be needed to change these perceptions Also known as perceptual maps

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 27

Positioning of Hotels : Price versus Service Level (Fig 7.4)

Expensive

Grand
Regency PALACE
Shangri-La

High Service Sheraton

Atlantic

Moderate Service

Italia Castle
Alexander IV Airport Plaza

Less Expensive
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 28

Positioning of Hotels in Belleville: Location versus Physical Luxury (Fig 7.5)

High Luxury

Grand Sheraton PALACE

Financial
District

Regency
Shangri-La

Shopping and Convention District Center

Inner Suburbs

Castle Atlantic

Italia

Alexander IV
Airport Plaza Moderate Luxury

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 29

Positioning after New Construction: Price versus Service Level (Fig 7.6)
Mandarin Heritage Marriott Continental
Expensive

New Grand

Action?

Regency
High Service

PALACE

Shangri-La No action?
Atlantic Sheraton Italia

Moderate Service

Less Expensive

Castle Alexander IV Airport Plaza

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 30

Positioning After New Construction: Location versus Physical Luxury (Fig 7.7)
High Luxury

Mandarin New Grand Continental Action?

PALACE

Heritage Marriott Sheraton Shangri-La

Regency

Financial District

No action? Shopping District

and Convention Center

Inner Suburbs Italia

Castle

Alexander IV Atlantic

Airport Plaza

Moderate Luxury

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 31

Changing Competitive Positioning

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 33

Repositioning
Firm may have to make significant change in existing position
Improving negative brand perceptions may require extensive redesign of core product Repositioning introduces new dimensions into positioning equation that other firms cannot immediately match

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 34

Changing Perceptions through Advertising: Long Island Trust

Increased competition among banks in New York state after change in banking laws led to opening of new branches Long Island Trust rated below other banks on branch availability, full range of offerings, service quality etc., but #1 on helping residents and economy of Long Island (suburban New York City) Advertising played to perceived strengths rather than trying to improve perceptions of attributes rated less favorably
Why send your money to a city if you live on the Island? It makes sense to keep your money to close to homewe concentrate on developing Long Island o The city is a great place to visit, but would you want to bank there? o Perceived strength of being a Long Island bank for Long Islanders had a positive halo effect on other attributes
o

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 7 - 35